FCPAméricas Blog
Whistleblowers: 2014 Year In Review
12.04.2014
The SEC 2014 Annual Report to Congress on the Dodd-Frank Whistleblower Program was published on November 17, 2014. This post highlights five relevant developments this year related to SEC whistleblowers.
Increase in number of tips received by the SEC. The number of whistleblower tips the Commission receives annually continues to increase: 3,001 tips in the 2012 fiscal year, 3,238 tips in the 2013 fiscal year, and 3,620 tips in the 2014 fiscal year. The number of tips related to FCPA issues also continues to increase. In total, 159 tips received in the 2014 fiscal year were related to alleged FCPA violations. In fiscal year 2012 and 2013, 115 and 149 were related to FCPA issues, respectively. Since August 2011, when the SEC’s Office of The Whistleblower was established, until the end of fiscal year 2014, a total of 10,193 tips from whistleblowers were received.
Increasing awards and foreign whistleblowers. Since the beginning of the whistleblower program, the SEC has awarded fourteen whistleblowers, nine of them in the fiscal year 2014. On September 22, the SEC authorized an award of more than $30 million to one whistleblower in particular, the largest to date under the program. This was also the fourth award under the Program to a whistleblower living in a foreign country. The information provided by the whistleblower allowed the Commission to discover a substantial and ongoing fraud.
More tips from the Americas. The SEC is receiving numerous tips from abroad. The 2014 Annual Report indicates that, since the beginning of the whistleblower program, the Commission has received tips from 83 countries outside of the United States. In fiscal year 2014 alone, the SEC received tips from 60 foreign countries.
From the Americas (not including the United States and Canada, where most of the whistleblowers in the region reside), in fiscal year 2014, the SEC received 50 tips from 10 countries: Argentina (14 tips), Brazil (6), Colombia (4), Costa Rica (1), Curaçao (13), Dominican Republic (2), Ecuador (2), Mexico (6), Nicaragua (1), Peru (1). It is not clear whether the tips from the Americas are related to FCPA or other securities issues.
In fiscal year 2013, the SEC received 25 tips from 10 countries: Argentina (6 tips), Brazil (4), Mexico (4), Curacao (4), Colombia (2), Costa Rica (1), Belize (1), Cayman Islands (1), El Salvador (1), and Panama (1). In fiscal year 2012, the SEC received 17 tips from 5 countries: Venezuela (6 tips), Mexico (4), Brazil (3), Argentina (1), Bolivia (1), Curacao (1), and Dominican Republic (1).
The SEC’s first anti-retaliation case. On June 16, the SEC exercised its anti-retaliation authority for the first time. The Annual Report summarizes:
[T]he head trader of Paradigm Capital Management reported to the SEC that the company had engaged in prohibited principal transactions. After learning that the head trader reported the potential misconduct to the SEC, the firm engaged in a series of retaliatory actions, including changing the whistleblower’s job function, stripping the whistleblower of supervisory responsibilities and otherwise marginalizing the whistleblower. The Commission ordered the firm to pay $2.2 million to settle the retaliation and other charges.
The SEC also filed amicus curiae briefs in private cases pending in federal courts to address the scope of the anti-retaliation protections established by the Dodd-Frank Act.
Individuals with compliance or internal audit responsibility receiving awards. On August 29th, the SEC announced that a whistleblower with audit and compliance responsibilities was awarded an award under Dodd-Frank. The whistleblower reported the violation internally, and then to the SEC when the company failed to take appropriate timely responses. This case is noteworthy as it highlights that individuals with internal audit or compliance-related functions may still be eligible under the whistleblower program in certain limited circumstances.
The Annual Report also sheds some light, with aggregate information, on the profile of whistleblower awards recipients. According to the Annual Report, 40% of the individuals who receive awards are current or former company employees. Out of them, 80% raise their concerns internally first. Moreover, three cases have involved two or more whistleblowers that jointly submitted information and materials to the SEC. Finally, the Annual Report informs that award recipients have provided specific information, identifying particular individuals involved in the fraud, pointing to specific documents that substantiated their allegations, and explaining where relevant documents could be located.
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© 2014 FCPAméricas, LLC
Post authored by Carlos Henrique da Silva Ayres, FCPAméricas Contributor
Comments
December 4th, 2014 at 4:39 pm
Whistle blowing, given appropriate channels for reporting and rewards to whistle blowers, is the best fraud/corruption or any other crime detection strategy.
President – IICFIP Incorporation USA